New lockdown sparks government move to help with repayments – but full details are yet to be revealed.
Banks and building societies will extend mortgage payment holidays for up to six months, after the Prime Minister tightened Covid-19 restrictions over the weekend.
Borrowers seeking to make use of the extra payment holidays do not need to contact their lenders yet, according to UK Finance, the banking trade body.
Lenders will start providing information on how to apply for the forbearance measures from today.
From 5 November until 2 December the government has ordered an England-wide lockdown, where all non-essential shops, as well as restaurants, bars, gyms, beauty salons and other recreation and leisure facilities must close.
Following the decision, the government is extending the job retention scheme for another month. But small businesses and workers who have already faced months of reduced incomes are expected to suffer further from loss of earnings.
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While well-off households have been able to spend less and save more than they have lost in income during the coronavirus crisis, according to the Institute of Fiscal Studies, among poorer households spending falls have been much smaller and drops in income larger.
The top fifth wealthiest households cut spending by 41% (£195 per month), compared with 30% (£75) for the poorest fifth, who spend more of their income on essentials. On average this has led to a £170 per month drop in poorer household’s bank balances between March and September.
Eric Leenders, managing director of personal finance at UK Finance, said:
“The industry is working closely with the Financial Conduct Authority to ensure customers impacted by the new lockdown measures will be able to access the most appropriate support.”
To help ease the pressure on family finances, the Financial Conduct Authority (FCA) is also set to announce further repayment holidays for borrowers with personal loans, credit cards, motor finance, rent to own, buy-now pay-later, pawnbroking and high-cost short-term credit.
“It is important that consumer credit customers who can afford to do so continue to make repayments. Borrowers should only take up this support if they need it,” the regulator said in a statement.
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The FCA wants lenders to give similar relief to loan borrowers as that being offered to mortgage customers, so consumer credit borrowers who have not yet had a payment deferral can pause repayments for up to six months.
Under the proposals borrowers who are currently benefiting from a first payment deferral would be able to apply for a second deferral.
For high-cost short-term credit (such as payday loans), consumers would be able to apply for a payment deferral of one month if they have not already had one.
Consumer credit customers should not contact their lender just yet. Lenders will provide information soon on what this means for their customers and how to apply for this support if our proposals are confirmed.
It may also be in the interests of consumer credit customers who expect to have long-term financial difficulties to agree other forms of tailored support with their lender, the FCA said.
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